In 2017 shareholder activism prompted companies to become more strategic in dealing with activist demands, though investors are also viewed as better suited to combat opposition against their campaigns. Experts say that sector distress and poor individual performance will leave many companies vulnerable to activist campaigns in the year ahead.
In order to find out how shareholder activism will impact 2018 dealmaking, Toppan Vintage, in partnership with Activistmonitor and Mergermarket, is pleased to present the newest edition of the M&A Pulse newsletter.
Toppan Vintage question: What will be the top demands of shareholder activists over the coming 12 months? Leading deal experts weigh in...
In November 2017, serial activist Bill Ackman suffered a defeat in one of the most common battles waged by activist funds: a proxy fight for seats on a company’s board of directors. In this case, Ackman’s Pershing Square Capital Management failed in its quest to gain three director positions at ADP. Each of its candidates received the support of less than 25% of shares voted.
In our survey, 68% of respondents said they think one of the top two demands among shareholder activists in 2018 will be for board seats or management changes, making it the top predicted demand. If they are correct, it will represent a continuation of a trend seen in recent years. Over the first three quarters of 2017, 29.6% of demands related to board seats or management changes, compared to 17.8% concerning governance changes, and 13.9% pushing for the sale, merger or IPO of a company, according to ActivistMonitor data.
“The main focus of many activists has been to acquire a board seat,” said a managing director at a Canadian investment bank. “They have been able to manipulate situations enough in the past to get seats, and they will pursue this in the future as well.”
One-fifth of our respondents predicted other categories of demands to be among the top two, such as opposition to M&A deals. Analysis by ActivistMonitor shows this category includes just 2.3% of demands – but it includes at least one prominent recent case. Former corporate raider Carl Icahn announced in November 2017 that he had taken a 13.5% stake in oil and gas producer SandRidge Energy with the intention of opposing its US$746m acquisition of peer company Bonanza Creek Energy, calling the deal “nonsensical.”